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Austral closes out hedge position

NEWS RELEASE 3 June 2008

Austral closes out hedge position, increases net oil revenues

Austral Pacific Energy is expecting a major boost in net oil revenues after closing out a hedge position on its Cheal oil production.

The hedge close-out involves the remaining 255,700 barrels of its forward position, taken in 2006 when it forward sold approximately 23% of its proved and probable Cheal reserves at $65 per barrel.

This arrangement was part of the company’s Cheal development financing facility.

Chief executive, Thom Jewell, said the hedge programme was prudent at the time, but it is now important to close out this facility and capitalise on today’s $125 a barrel oil price.

“Cheal is currently producing 500bopd and we have two new wells planned to increase production by the third quarter of this year,” he said.

“Closing out the hedge now means we can access world spot prices for all our production.

“This will give us additional net revenues with which to maximize the potential in Cheal, and to start monetizing other projects for which we already have sales agreements in place.”

The hedge close-out cost Austral approximately US$17.8 million.

Jewell said the company has a secured commitment from its bankers to fund the close-out as part of its corporate restructuring.

The company will record a US$8 million second quarter loss on this hedge close-out.

It has also purchased future price options at $90 per barrel to protect a portion of its future production revenue against a significant fall in future oil prices.

ENDS

www.austral-pacific.com

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